Who is Exempt from the New FLSA Rules and Why?
The newly rolled out Fair Labor Standards Act (FLSA) are changing (among other things) the way organizations must calculate overtime pay and who is eligible for it. While most jobs are governed by the FLSA, some are excluded from coverage by statute. Others are considered exempt from the overtime rules set forth by the FLSA. Those excluded are typically identified by job titles that are governed by other, pre-existing law like railroad workers (whose compensation is governed by the Railway Labor Act) and truck drivers (covered by the Motor Carriers Act). Today’s post will focus only on those exempt from overtime rules under the FLSA and why.
First, some definition. Non-exempt employees are those who are entitled to overtime pay and exempt employees are those NOT entitled to overtime. Most employees are non-exempt. There are some exceptions in the exemption rules for particular job roles, but for most employees whether they are exempt or not depends on how much they’re paid, how they receive payment and the nature of the work they perform.
How Much They’re Paid – With few exceptions, employees earning less than $23,000 per year are non-exempt meaning they must be paid for overtime hours. Those earning $100,000 a year or more are almost categorically exempt. The rules generally seem to be designed to protect those at the lower end of the pay scale.
How They’re Paid – Whether an employee is hourly or salaried plays a role, although the pay levels as defined above still apply. The FLSA provides a salary basis test designed to determine who is exempt and who is not. Salaried employees are defined as:
- Employees regularly receiving a predetermined amount each pay period for work performed any week
- Pay exclusive of board, lodging or other facilities
- Pay not subject to reductions based on variations in the quality or quantity of work, BUT…
- Employees subject to disciplinary deductions, in full-day increments, pursuant to a written policy uniformly applied to serious workplace misconduct
- There are other considerations included in checklists provided by the Department of Labor
The Nature of the Work Performed – There are exemptions for the following four specific job roles: Executives, Administrative Workers, Professionals and Computer Workers. There are slight variations in the rules specific to each of these job roles and again, the Department of Labor provides detailed checklists to help employers stay compliant with the exemption rules.
Like any newly passed piece of legislation/regulation, there is typically a bit of uncertainty and confusion about what it means to be compliant as organizations and their workforce management functions grapple with learning the often-complex ins and outs of the new rules. In particular, these are the best times to be able to lean on an organization like nextSource, populated with industry experts who can help customers ensure they’re operating in full compliance with the law. If you’re unsure how to accommodate the new FLSA rules, reach out to nextSource today for assistance and expert guidance.